Orders of the Day — Budget Proposals and Economic Situation

Part of the debate – in the House of Commons at 12:00 am on 6 April 1960.

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Photo of Mr John McKay Mr John McKay , Wallsend 12:00, 6 April 1960

This debate has been very interesting. We have heard a lot about what we should do, and the way we should do it. There has been a strain of morality running through the speeches; but, however good that may be, I must point out that one must have sufficient intelligence to use one's strength in the right direction. I wondered how the Chancellor was moving in this respect. He made, a great appeal, publicised throughout the country, to industrial magnates to try to bring about a reduction in prices. He did not succeed. The spirit of good will did not exist. One wonders whether the new taxation on the engineers of industry is due to the feeling that these people could do better, and that now is the time to force them to meet the Chancellor's proposals.

One thing puzzles me. I presume that if the Chancellor had been successful in his appeal it would have meant an increase in purchasing power for the working man and the rest of the community. We now find, after only a few weeks, that there is a cry for economy and talk of an international crisis in the balance of payments. We all realise that it is necessary to keep the balance of trade in its right perspective. We have been looking at the economy from the point of view of trade, and one begins to realise the needs of our people. When the Chancellor appeals to people to get prices down, he knows whether they can do it within reason. Nevertheless his appeal cut no ice.

For many years I have felt that the industrialists of this country are not influenced by moral considerations. This has been emphasised today. Industrialists go into business for profit, and one can understand that, but if they are patriotic and are doing well in industry surely one would expect a limit to be imposed on the amount of profit that they make.

Is there no moral quality which influences these people when they are considering profits? Is there no quality within them which prompts them to put a brake on prices? Do they ever think, "I am getting plenty of profit and I am doing well. There is no urgency for me or my firm to make more money by way of profits. I am producing goods that are required. I am getting far more profit than I require to lead a good life"? The answer is that they do not.

For many years profits have continued to rise. There seems to be no limit. The question of cutting prices does not seem to enter into their considerations. That is why the Chancellor, aware of the tremendous profits that are being made, made his appeal for lower prices, but, as I said, he was unsuccessful.

The Chancellor has now come down on the other side and increased the Profits Tax from 10 per cent. to 12½ per cent. That is a substantial increase and there must have been a good reason for it. However, we will leave it to the Tory back benchers to fight out that problem. I suppose that that is the nub of their agitation. We will let them carry on to see what they can do about it, but let them at the same time consider the welfare of the country. If hon. Gentlemen opposite think that they are more patriotic than hon. Members on this side of the Committee, this will be a test of their patriotism. Are they prepared to co-operate with the Chancellor and give him some encouragement? Are they prepared to tell him that he is doing something for the good of the country? The Chancellor believes that he is, otherwise he would not have done it.

The Chancellor may have made a mistake. He has made mistakes in the past, but to me this is a matter of principle. Today we have men in many occupations who work hard—married men who earn about £8 10s. a week, or about £440 a year. While I have no objection to people living on invested income and getting the same amount of money as a man who works hard every day of the week, there is a principle involved here. When one is considering giving relief to people, particularly to people who receive an income of about £440 a year from money that has been invested, it is out of tone and bad judgment to so make the tax exemptions that the married wage earner is treated in a worse way than the man of 65 years who gets his money from interest on invested capital. A man who earns about £8 9s. a week does not get the same treatment as the man or woman who has money invested.

When the individual who has invested money becomes 65 he gets his money net, but when the wage-earner receives £440 a year, a low-paid married man, despite his low wage he has special liabilities and penalties attaching to that £440. There is about £26 in insurance, £13 in taxation, at least, and £13 on expenses attached to his job. The very low wage-earner takes home about £52 less than a person living on invested capital. When a change is made which is favourable to people who perhaps have £12,000 invested, they should not be given an advantage over a man who earns the same amount in wages as they receive by way of investment income. By some method we ought so to arrange the taxation system that that man takes home at least as much as those who are living on investments.

I put down a Question on this matter asking how much it would cost to help such a man so that he could take home more than he does at the moment. In the reply, I was told that it would take at least £100 more personal allowance. The weakness seems to be that if the Chancellor gave £100 extra allowance to that man all the other people would have to get an extra £100. No one can make me believe that the Chancellor does not know of ways and means to get over that. Qualifications could be introduced in the taxation system to get over difficulties of that kind. Two or three years ago, by a special piece of legislation which had never been introduced before, these people were exempted. The Chancellor could have arranged for wages earners similarly to be exempt so that until they went beyond a particular limit they would get an annual allowance of £100.

Taxation is a knotty question but our minds should be more concentrated on the social necessities of the people. We should be thinking about what has to be paid in National Assistance and such matters. Is it a system we should uphold that when such allowances are given in National Insurance more than I million people who have paid into insurance have to go to National Assistance to enable them to live?

So far as I can judge the psychology of the Conservative Party and of the Government, they seem to delight in the principles they are now adopting, or applying. They stand hard and fast on the question of pensions. They say that we can get over the difficulty of poor unfortunate men and women who cannot live on their pensions alone by making them go to National Assistance in order to get something worthwhile. When we are discussing these things, I do not think it right to concentrate on the question of pensioners. Many men are worn down in health and are off work for six or twelve months. Surely they need as much help as pensioners.

There is a lot said nowadays about savings. Savings are a great instrument to help the Government to get money in order to meet the needs of the country, but the more we examine savings the more intricate the matter becomes. The financial system of the country has so worked in past generations that all sorts of recompenses are given to various individuals for the amount of saving they can make. The Government ask for loans and give 4 per cent. or 5 per cent. tax-free to encourage saving. If a poor man goes to a bank he gets as much interest for his money as does a rich man in the same department. He will not pay so much in, but on whatever he pays in in the same department he gets the same interest as the rich man.

There are other ways of saving. There is the life endowment system, which generally pays 3s. 6d. in the £, 17 per cent. A tremendous amount of money goes into life endowment. Then there is the great national social machine—not a life endowment or an individual transaction with a company —which we have set up since 1946. No doubt that is a great saving instrument. It is acknowledged as such. Do we find that the poor man, the low wage-earner, when he puts his money into National Insurance gets the same tax relief on his payments towards pension as better-paid people? Not at all. We have a most peculiar system which has worked itself into the economy of the country. It has been carried for generations. Since 1946 it has still carried on, and most people think it is justified within the National Insurance system.

What will happen under the new graded pensions scheme which is to be introduced in 1961–62 under the National Insurance Act, 1958? I am not sure about the figures, but I think that about 8 million people will be affected. All those earning from £16 a week upwards will be receiving a tax relief, every week, in respect of their contributions. These 8 million people within the National Insurance Scheme will be receiving tax relief at the rate of 2s. 6d. a week. Under the ordinary scheme we are paying about 5s. a week towards retirement pension, but when the new Act comes into force, these men will have to pay more. They will be paying perhaps 8s. a week as a contribution to pensions. Thus, instead of Income Tax relief on 5s., they will get relief on about 8s. a week; they will get 2s. 6d, a week in tax relief on their pensions contributions.